This can´t be so simple: If you make profits, somewhere, someone is becoming poorer.

You huff and puff but say nothing! That may not be your fault. After all, there is a generation of Fox news watchers that have been herded to believe all sorts of nonsense.

Arguably the big event was the socialist calculation debate. Could a socialist planner hypothetically mimic a perfectly competitive equilibrium? The answer is no. As shown by Hayek, the distributed and tacit traits of knowledge ensures the need for information pooling devices such as the price mechanism. However, socialism provides a means to embrace the price mechanism whilst avoiding the coercion innate in the labour contract. Without the need for hierarchy to generate economic rent at the expense of the employee, we have something more akin to the celebration of exchange.

Again you provide no content! Crisis theory is not limited to heterodox economics. Thus, we only have to refer to the microeconomic study of the firm to understand macroeconomic history and the tendency towards stagflation (that is, capitalism's tendency towards market concentration and the replacement of the market with ad hoc pricing systems such as cost-plus pricing.

Such naivety! Note that the US, perceived to reject the extra-market interventionism innate in liberal and social democracy, uses its military sector to stabilise demand and to reduce market failure in technical progress.

Is that quoted straight from an anti-intellectual right wing site? Back to the sorry business of reality! Socialism encompasses a series of vibrant political economic approaches. Market socialism removes much of the role of central government; whilst a role for public/merit good provision continues, the macroeconomy is more stable

 

There is not a fixed amount of goods and there is not a fixed amount of wealth. There is not even a fixed amount of some natural resources. The process of producing corporate profits creates wealth for all kinds of people along the way. The owners keep a share of profit. The company's suppliers get a share. The employees get a share and so forth. You only need to follow the history of the GDP of the U.S. to see how that wealth has increased over the years. If you buy a product from a company and that contributes to profit, just understand that the money you used to buy it represents wealth that was created by another company's profit. Wealth can, does and has increased over the years.

 

True, but just because an individual creates more wealth doesn’t mean that he can keep the wealth which he creates. There exists an army of lawyers and lobbyist whose sole purpose is to create regulations and privileges which remove the wealth created by producers, from those producers, and deliver that wealth to parasitic rent-seekers. Corporations spend billions on such legal maneuvers, specifically designed so that they can receive higher profits, entirely at the expense of producers. The whole “the pie is growing” argument is usually just offered as a diversion designed to hide that fact.

What good is a “growing pie” if the producers just have to give a bigger portion of the pie to parasitic rent-seekers?

Unless you have discovered a way to create matter and/or energy from the void, then natural resources remain fixed. Natural resources describe everything, every atom, every wave length of energy, whose arrangement has not been altered by labor. Some natural resources are scarce while others are super abundant, but either way they are indisputably fixed in supply.

Or as is more often the case: “The process of producing corporate profits creates wealth for all kinds of rent-seeking-parasites along the way.”

 

Capitalism (the classic definition, not your bastardized "the government made me do it" version), evolves much the same way nature does. Progress is a result of rewarding success and leting failures occur.

Socialism didn't exist until recently, because we couldn't afford the dead weight. Why recently, because we finally have enough productivity to spare.

Which supports my point, capitalism outperforms socialism. You keep rambling about "rents" in capitalism. Do you miss the point that socialism has it's own "rents" from laggards and blowhards (that take much more than they give)?

"Cost plus pricing" can't exist in a competitive market place. Only when the government offers protection by law or regulation.

As do I.

You seem to have this dream that socialism means what you think it does. Your version doesn't exist in the real world. The "followers" in a company "owned" by the employees, looks to the "leaders", and over time, those leaders own the company. The only way to prevent that is government interference, an government rife with heiarchy. In time, even the most benevolent of socialism's devolves into rent seeking toadies.

 

Let's not pretend that you know the political economy required to understand how capitalism has developed. You of course use words like "evolve" as a means to disguise the massive hole in your logic. We know that economic development has been inately linked to government coercion (see, for example, the common use of tariffs). However, let's also consider 'evolutionary economics'. The main lesson? There are multiple equilibria; a concept that destroys the 'survival of the fittest' garbage for the non-economic twaddle it represents.

An ignorant statement (unless you want to get all Schumpeterian on us).

The key aspect of socialism? Worker ownership is more productive. You keep shooting yourself in the foot!

A couple of issues with your grunt here. First, capitalism does not out-perform market socialism. We know that the empirical evidence confirms that worker ownership leads to a superior result associated with higher productivity. Second, you clearly don't understand what economic rents entail. You've twinned that ignorance with a nonsensical point. What are you trying to say? Are you trying to humph about equaity in outcome? (That wouldn't be a good idea as socialism doesn't deliver any such result. Whilst it does acknowledge the link between efficiency and equity, its motivated through achieving equality of opportunity. A result that anyone seriously interested in individualism will treasure)

We know that cost-plus pricing is the norm. Can we make the ludicrous claim that its merely the result of government regulation? Of course not! Consider, for example, the resource based approach to the theory of the firm. That informs us, as the firm attempts to ensure full employment of its resources (particularly with regards to organisational knowledge), the orthodox views over the boundaries of the firm (I.e. Limited by economies of scale and scope) are no longer valid. Firm success will automatically refer to growth and therefore market concentration.

Socialism is vibrant in the political economy stakes. I would differ, for example, from those linked to anarchism. The problem for you is that, once we refer to post-Hayekian market socialism, we necessarily attack your position as nothing more than a right wing ideology which guarantees class inefficiency

Good point well made! We currently have an inefficient system characterised by unemployment, underemployment and underpayment.

A load of tosh! We would of course expect hierarchy in a company. That hierarchy, given division of labour, will unite profitability and productivity criteria. And the government? They merely have to protect property rights. That focus will be on growth in SMEs.

I was amused, however, by your use of 'followers' and 'leaders'. Sounds like you have some common ground with the fascist's 'theory of the elites'. Golly gosh!

 

I used the term evolve, because, like in nature, capitalism is the most effective in dealing with the economic conditions. The weak are weeded out, but unlike in nature, where they are killed are eaten, the losers are re-tasked in a more profitable venture.

Only because you can't seen to acknowlege that capitalism predates government.

Nature isn't effected by multiple equilibria? Those that thrive, are the best adapted to deal with the variations in food sources, water, competitors, preditors, disease, weather, etc...

In the US, one in 4 live off the the other 3. How long would that last in a band of hunter gatherers? Or, even in England in the 1600's?

Yet, you said they weren't the dominant form of business because they were less profitable. That seems pretty weak, is there a better reason?

Let me spell it out for you. Employee owned is more productive, but less profitable than capitalism. Where does that differential go? To the employee, initially. Then it goes to less, and less effective processes, as each individual does what they think is best. That is worse than economic rents, that is pure waste.

A firm uses cost plus pricing to assure the products they sell are profitable. The market determines if that price point is acceptable - when the price is too high, they stop buying, the firm stops manufacturing. Unless the government has provided a defacto monopoly by regulation, for a needed good.

Yet, I don't need to attack your dream of socialism. Reality does that for me.

When can we expect the nature of man to change enough for your version of socialism to exist?

How may SME's retain employee ownership as the grow? Socialism works in small communities, because we evolved from small groups. Increase the size, and trust evaporates.

How many on this forum would trust you?

How many multinational employee owned companies are there (where the employee ownership is more than a share of two of stock)?

Actually, I just had to simplify the concept so you could follow it - sounds like I need to simplify further.

 

Given you type without the required knowledge, you're not aware of the mistakes that you make. By bringing up 'evolve' you didn't realise that you'd introduce evolutionary economics; an approach that shows the naivety of your position by rejecting the simple equilibria approach adopted in orthodox economics. Once we have mulktiple equilibria all bets are off! The market process can get stuck in an inferior result, with the standard invisible hand criteria incapable of dragging the economy to the more efficient outcome.

Because it doesn't. Exchange predates government, but exchange is consistent with multiple economic paradigms.

The class example is hysteresis in unemployment. A shock to the economy leads to an inferior long term trend, whereby the invisible hand is incapable of ensuring human capital is fully exploited. Again, given you don't understand the basics, you're simply unaware of the consequences of multiple equilibria for your argument.

Capitalism 'naturally' delivers unemployment. Without sufficient intervention it also delivers underclass problems. Don't like it? Why golly, you'll have to reject capitalism.

In capitalism productivity and profitability are often divorced. We see that with the use of inefficient hierarchies that are used to divide the workforce and enforce greater economic rents.

The employee owned enterprise will be commonly restricted to specific sectors (e.g. Worker control where gross organisational slack has threatened closure and redundancy. They will often find that they can't compete, with the profit motive (encouraged by deep pockets created by vertical and horizontal boundaries of the traditional firm) incapable of ensuring a productive efficiency result.

You show your innocence again! Cost-plus pricing cannot occur if market competition is operational. Firms would be price takers, with price determined by supply and demand conditions. The use of artificial mechanisms, such as cost-plus, demonstrate market power. They also ensure instability will be the norm (I.e. There will be a 'natural' tendency towards stagflation in any downturn)

You can't attack socialism as you neither understand capitalism or socialism

A nonsensical question. There is no change required. Indeed, the invisible hand would certainly work better in socialism (given we wouldn't see so much economic planning, with market concentration less of an issue)

Another nonsensical questions. The important point is that socialism creates conditions suited to a greater application of tacit knowledge. We'd see posiive effects on firm creation through the delivery of equality of opportunity. However, we also have to protect property rights and, as firms grow, there has to be a switch (with suitable compensation) to worker ownership.

Trust isn't required. Competition continues. Of course, with the likelihood of greater competition, we'd see certain trust problems (e.g. Moral hazard problems created through asset specificity and imperfect contracting) dissipate.

Your third silly question.

And you fourth! In terms of the multinational, you'd have to craft an argument based on international socialism being required. You're not going to be able to do that.

You've indeed given a simplified version of the theory of the elites.

 

Given you type without the required knowledge, you're not aware of the mistakes that you make. By bringing up 'evolve' you didn't realise that you'd introduce evolutionary economics; an approach that shows the naivety of your position by rejecting the simple equilibria approach adopted in orthodox economics. Once we have mulktiple equilibria all bets are off! The market process can get stuck in an inferior result, with the standard invisible hand criteria incapable of dragging the economy to the more efficient outcome.

Because it doesn't. Exchange predates government, but exchange is consistent with multiple economic paradigms.

The class example is hysteresis in unemployment. A shock to the economy leads to an inferior long term trend, whereby the invisible hand is incapable of ensuring human capital is fully exploited. Again, given you don't understand the basics, you're simply unaware of the consequences of multiple equilibria for your argument.

Capitalism 'naturally' delivers unemployment. Without sufficient intervention it also delivers underclass problems. Don't like it? Why golly, you'll have to reject capitalism.

In capitalism productivity and profitability are often divorced. We see that with the use of inefficient hierarchies that are used to divide the workforce and enforce greater economic rents.

The employee owned enterprise will be commonly restricted to specific sectors (e.g. Worker control where gross organisational slack has threatened closure and redundancy. They will often find that they can't compete, with the profit motive (encouraged by deep pockets created by vertical and horizontal boundaries of the traditional firm) incapable of ensuring a productive efficiency result.

You show your innocence again! Cost-plus pricing cannot occur if market competition is operational. Firms would be price takers, with price determined by supply and demand conditions. The use of artificial mechanisms, such as cost-plus, demonstrate market power. They also ensure instability will be the norm (I.e. There will be a 'natural' tendency towards stagflation in any downturn)

You can't attack socialism as you neither understand capitalism or socialism

A nonsensical question. There is no change required. Indeed, the invisible hand would certainly work better in socialism (given we wouldn't see so much economic planning, with market concentration less of an issue)

Another nonsensical questions. The important point is that socialism creates conditions suited to a greater application of tacit knowledge. We'd see posiive effects on firm creation through the delivery of equality of opportunity. However, we also have to protect property rights and, as firms grow, there has to be a switch (with suitable compensation) to worker ownership.

Trust isn't required. Competition continues. Of course, with the likelihood of greater competition, we'd see certain trust problems (e.g. Moral hazard problems created through asset specificity and imperfect contracting) dissipate.

Your third silly question.

And you fourth! In terms of the multinational, you'd have to craft an argument based on international socialism being required. You're not going to be able to do that.

You've indeed given a simplified version of the theory of the elites.

 

Is there supposed to be a compelling arguement in all that?

 

Sounds like you can't even craft a blagging response! Tut tut

 

Response to what? Derision and buzz words? Your faith in an economic system you have just provided several reasons why it can't work?

As I said, no compelling arguement.

 

A low brow dodge, nothing more. Clearly you haven't got the means to respond to the multiple comments, you're therefore made irrelevant. I'm not surprised, the ability to embed socialism within theory of the firm whilst showing the gains available from individualism will always make the right winger impotent (and make shocking errors like finding common ground with fascism)

 

actually, in a perfectly efficiency market, economic profits must always equal zero, since once a company makes a profit, other companies will swoop in to compete, thus resulting in a reduction of that profit until it is zero. All profits, therefore represent market inefficiencies. If the market were functioning perfectly, there would be no profit.

 

You mean 'perfectly competitive'? That cannot be used to determine some 'perfectly efficient' result. For example, as we move away from the naïve assumptions used to define perfect competition, we cannot assume the cost curves will remain the same.

I suppose you could go for a classic example of monopolistic competition with zero barriers to entry. That would, however, underplay economies of scale and the complex nature of product differentiation for our understanding of time and how the enterprise evolves.

 

a perfectly competitive market is also the ideal market. It is the case in which every resource is most efficiently allocated to maximize societal benefit. The market distorting effects of barriers to entry, product differentiation, economies of scale, etc... are movements away from the ideal.

 

if your profit is zero then you have no room to grow and you are destined to die..companies need profits for future growth or for when the chit hits the fan like right now

 

rule of thumb is always to have atleast 3 to 6 months reserves..but in the last 4 years its now a year or more..i bumped my up to 3 years just to be safe..

 

Product differentiation is a distortion? Homogeneity is an ideal? Are you Borg or just taking the mike?

 

What about worker ownership reduces the tendency towards vertical integration? If that's a means to reduce transaction costs why would it be any different following a change in property rights.

Also, I don't see how a change to socialism would result in the extinction of cost-plus pricing, information regarding marginal revenues is still expensive to acquire and the use of markup allows for predictability. Yes, it's arbitrary, but it exists even in highly competitive markets because it reduces costs associated with decision making and that a firm cannot know the shape of it's demand curve at all given times.

 

Both are linked to the increased competition one would expect with the knock on effects of equality of opportunity for self-employment. As competition increases the problems associated with hold-up fall. As competition increases the impact of cost-plus pricing narrows

 

This would require more than just a change in property rights though, wouldn't it? People are still going to be reluctant to put their well being on the line for an entrepreneurial venture that in all likelihood would in in failure as most do.

Wouldn't merger be just as likely?

So, still present, just to a lesser degree?

 

We know that actual self-employment rates are significantly below desired rates. We know that, with also risk aversity, will reflect inequality of opportunity.

Hold-up represents a counter balance to the agency and influence costs associated with vertical integration. Reduce its relevance and more firms will avoid vertical integration.

There will of course be continued aspects of economies of scale. Cost-plus will therefore continue. As it falls though, one ource of crisis is gradually removed

 

A rising tide lifts all boats.

 

I understand what you are saying, but what will (eventually) happen as more and more manufacturing jobs becomes automated? As these foundational jobs evaporate, who will have the money to buy the things the robots are making?

 

But what does this really matter to the quality of our everyday lives, especially those hundreds of millions in China, India, and Africa who live in substandard conditions and struggle for subsistence?